by Marc Bastow | June 25, 2012 6:30 am
I ask you: What is the gold standard of investment?
Before answering, think of it in this manner: What will happen first, if ever: Apple (NASDAQ:AAPL) stock reaching $1,000 per share, or gold prices hitting $2,000 per ounce?
It’s a question that’s wild to think about, as both figures lie on the fringe of analyst hopes. But it’s also a question that has a bigger meaning to investors than just dollars and cents, as both represent fairly long-established investment mind-sets.
Gold is the commodity of choice for investors seeking relative safety, whether it be a hedge against inflation or security amid geopolitical or market strife. Times not so good? Invest in gold. The yellow metal long has been viewed as a “safe haven” for conservative investors.
Unfortunately, an investment directly into gold or a gold ETF index like SPDR Gold Trust (NYSE:GLD) won’t generate any income (like dividends), but that’s the tradeoff for the conservative investor who believes in the upward march of the precious metal.
The problem in 2012 is that the slow but steady march in gold prices from 2011 has turned down — at $1,606 an ounce at this writing, the price has absolutely stagnated. Indeed, gold prices have lagged considerably the whole year, at one point slumping for an almost unheard-of three consecutive months.
Gold’s once-assumed march to $2,000 per ounce now looks nearly impossible. After all, what would be the impetus for a run-up now?
Well, how about continued insecurity and instability in Europe and the eurozone, lackluster growth in the U.S. economy, and an unshakeable belief that gold is still the standard by which all else is measured? What about a belief by some enthusiastic experts that gold will eventually see $10,000 per ounce?
Those worries don’t look like they’re going away. And disaster always lurks around the corner.
Now let’s look at Apple, a company representing all that is held dear by growth investors.
Despite a recent pullback from the dizzying 52-week high of $644 per share down to around a “measly” $580, Apple appears poised to commence their run to $1,000 at any time. Earnings season is upon investors once again, and there’s no reason to believe Tim Cook & Co. won’t knock another one out of the ballpark.
Last quarter’s results were otherworldly, and the factors underlying the breakout still are firmly in place: iPads and iPods are selling like crazy, Mac products still are flying off the shelves, and with markets as robust as China and India still waiting, growth appears a certainty.
But let’s take at least one step back: Microsoft (NASDAQ:MSFT) just introduced its own tablet, the Surface, so potential customers might wait a tick or two before blindly buying their next iPad. Sure, China is a huge market, but it is a fickle one, too, and recent economic data suggests that the country’s economic growth might not be as robust as we’ve all hoped.
Here’s the bigger head-scratcher: If everyone assumes Apple will march ever higher, why is the stock trading at a conglomerate-esque 14 times earnings? Heck, Amazon (NASDAQ:AMZN) still sports a P/E of 183, but which would you rather own?
I thought so.
Which brings me back to the original question, and my prognostication, which is totally unprovable until it happens:
Gold will reach $2,000 before AAPL shares hit $1,000.
Why? Remember the tortoise and the hare? Well, in this situation, I think gold is the tortoise.
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he was long AAPL and MSFT.
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